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One of the factors that can make or break small businesses is the price of their products or services.
If the price is too high, the business will not be able to make a profit because not a lot of people will be supporting it. However, if the price is too low, the business will not be able to cover its expenses and buy employees.
That is why Ryan Neill, Group Head of Procurement for Empact Group says it is a challenge many entrepreneurs face when it comes to setting pricing.
“Many inadvertently set prices too high, ultimately pricing themselves out of the market and hindering their own growth.”
He says from an Enterprise Supplier Development (ESD) perspective, addressing the pricing challenge is crucial for the sustainable success of small and medium enterprises (SMEs). “Central to this issue is a misunderstanding of market dynamics and the value proposition of SMMEs (Small, Medium and Micro Enterprises).”
Neil adds that most entrepreneurs are driven by the desire for immediate profit and, therefore overlook the importance of whether their target market can afford it. When it comes to decision-making, he advises owners to ensure they understand their customers’ needs and preferences.
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He believes for small business owners to identify competitive pricing strategies, they need to do market research to find the pricing that aligns with their target audience. “Market research is key as it can foster long-term growth over short-term gains.”
Another element he advises entrepreneurs to recognise is the socio-economic implications of pricing inefficiencies. “These businesses play a vital role in local economic development, creating jobs, driving innovation, and engaging with communities.”
If the correct pricing strategy is not implemented, the business’s success can be hindered.
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He empathises the need for collaboration and mentorship to address the challenge of pricing. “ESD programs provide SMMEs with guidance, resources, and networking opportunities, empowering them to make informed decisions about pricing and business management.”
Neil believes through fostering a culture of knowledge sharing and support, the programs will enable SMEs to navigate market dynamics with confidence.
“Ultimately, pricing is about finding a balance between profitability and accessibility, short-term gains and long-term sustainability. From an ESD perspective, the goal is to create an ecosystem where SMEs can thrive, contributing to economic growth and social development.”
NOW READ: ‘It’s okay to ask for more money’: 7 steps to setting the right price as an entrepreneur
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